Nintendo blames Wii U for third consecutive operating loss

Japanese gaming giant Nintendo posted its third consecutive
operating loss in its annual
fiscal earnings report today (7 May), partially blaming the
loss on the struggling Wii U console. However it quickly followed
up the bad news by announcing two new Pokemon games for the
3DS.

The total loss on all properties was declared as 46.4 billion
Yen (£269 million), an increase of roughly a third in operating
losses from last year's 36.4 billion Yen (£211 million). The
full report from the fiscal year ending in March 2014 stated that
the family-friendly company "continues to pursue its basic strategy
of gaming population expansion by offering compelling products
that anyone can enjoy, regardless of age, gender or gaming
experience".

However, according to the company's sales reports, this approach
has failed to make the impact they predicted after last year's
losses, where it was forecast that 2014 would bring a profit of 55
billion Yen (£319 million). This year, the 3DS releases of
Pokemon X/Y, Animal Crossing: New Leaf and The
Legend of Zelda: A Link Between Worlds performed well, with
software sales exceeding the predicted 66 million to 67.89 million
units. However, as is becoming customary, this was not enough to
make up for the slump that's being blamed -- at least partially --
on the ailing Wii U console.

"The Wii U hardware still has a negative impact on Nintendo's
profits," states the earnings report. "Owing mainly to
its markdown in the United States and Europe, and unit sales
of software, which has high profit margins, did not grow
sufficiently." The Wii U's struggle to maintain relevance in a
post-next-gen console environment is clearly showing, however the
upcoming release of Mario Kart 8, and an offer of a free game for those who buy it, could turn the tide
in Nintendo's favour. Add to that the prospect of a new Super
Smash Bros game for the system slated for this winter, and two
new Pokemon games (Omega Ruby and Alpha
Sapphire) for the 3DS, announced only hours after Nintendo
posted their earnings.

Though the forecast today looks cloudy for Wii U's future,
Nintendo is far from considering dropping the console and starting
fresh. "Regarding Wii U," the report states, "which still faces a
challenging sales situation, Nintendo will focus on efforts that
seek to stimulate the platform. By providing software that
takes advantage of the Wii U GamePad, utilising its built-in
functionality as an NFC reader/writer, and adding Nintendo DS
Virtual Console titles to the Wii U software lineup."

And while losses of £269 million year-on-year may seem
unsustainable, Nintendo is still sitting on a considerable amount
of capital earned during the eight-year-long income spike caused by
the Wii, which has sold more than 101 million units since its launch in 2006.

UPDATE [07/05/14 15:30] This article
was updated to include the launch of the new Pokemon games on
3DS